Financial Accounting Blog

Thursday, November 06, 2003

Fluctuating Tax Rates This Accounting Web article talks about how companies are taking advantage of fluctuating tax rates to increase their reported earnings. This process is perfectly legal however, there is question as to whether or not it is ethical to give the perception of an increase in actual earnings.

Kimberly-Clark, Boston Scientific and International Paper are among the companies taking advantage of fluctuating tax rates to enhance their bottom lines. Most are taxed at 35 percent but don’t end up paying that much when they take advantage of various breaks afforded them by doing business in states with lower tax rates and by making good investments.

Overall third quarter earnings reports were the best in three years and many companies reported that steps taken to lower their tax rates helped the most.

While reducing tax rates isn’t illegal, it does raise some red flags on the ethical side.